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Quality vs. Quantity (Smart Business Cover Story)

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How Carl Kleimann avoided the commodity trap and grew Odyssey OneSource by changing its focus

By Kristy J. O’Hara
Smart Business Dallas | May 2009

In the late ’90s, Carl H. Kleimann saw changes rippling through both the human resources outsourcing field and his own company, Odyssey OneSource Inc.

“We saw more and more commodity players entering into our industry, meaning they were price-oriented,” the president says. “It wasn’t about quality. It wasn’t about providing strategic HR. It was really just about finding ways to save clients money but not necessarily improving their HR function.”

On top of that, many of Odyssey’s clients had been with the company for five, 10 or 15 years but were starting to outgrow Odyssey’s service capabilities, so consequently they were leaving.

Kleimann knew he needed to change Odyssey in order to adapt, but what direction should he go?

He could follow the commodity players and base everything on price, or he could try to be different by trying to improve the HR processes for small and midsize businesses. Financially, the latter made sense, because his clients would be more willing to pay to have someone help them improve their hiring and training processes than to simply do things like automating payroll, which is what the competition was doing.

“Toyota did a great job of building run-of-the-mill compact cars, and at some point, they decided to form Lexus to kind of go to the next level,” Kleimann says. “That’s what we were hearing from some of our clients. The things that they were having struggles with, nobody was out there bringing solutions for.”

Seeing the opportunity, Kleimann decided to set out to make Odyssey the Lexus of HR outsourcing.

“Things we did in 1990 and 1995 would no longer work in 2000,” Kleimann says. “It was about collaborating with employees, figuring out the direction we wanted to go and executing on those strategies.”


Gather customer data

Kleimann started by trying to identify what it was that clients were specifically looking for in an HR firm. He needed to know what services he could provide that would make him the Lexus of the industry, so he sought out customer feedback.

But when he first started gathering information, Kleimann made a couple of mistakes.
“The first thing I would say is make sure you understand what you’re asking and who you’re asking it of,” he says.

Kleimann and his team didn’t spend enough time specifying the questions they were asking.

“It just wasn’t concise enough,” he says. “If you’re going to take your client’s time, make sure it’s useful.”

For example, he asked many questions about employee benefits and — not shockingly — most said that benefits were too expensive. He realized he needed to be asking more structured questions, such as whether they would prefer a higher deductible with a more limited network and lower costs versus a lower deductible with a broader network and higher costs.

In another question, respondents said they needed computer skills training. But did that mean Microsoft Word and Excel, or did that mean network management and data security?

Instead of just crafting questions to ask your clients, take the process backward.

“You have to think about the options,” he says. “Think about the impact that the questions are going to have. … We should have been thinking about the potential solutions before we were even asking the question.”

For example, he knows there are only certain topics his company is qualified to train on, so there’s no point giving a client free rein to address things he can’t do.

“You need to think about the confines of your capabilities before you start asking questions that might lead to answers outside your confines,” Kleimann says. “Theorists would say don’t limit your feedback. But this is business. This isn’t a classroom, and there’s a certain duty that we have to help people focus easily and specifically on the data we need and can actually do something with.”

Also look at how easy or hard it is to answer your questions — not from your viewpoint but from the client’s.

“The more complex it is to answer your questions, the fewer people who will participate,” he says. “If you leave it at the sky’s the limit, you might get a broader range of data, but you’ll get it from fewer people. We’re businesspeople. We’re not going to spend a huge amount of time transforming your business. Make it easy, make it concise, make it relevant, and we’ll help.”

By changing the questions he asked, Kleimann got better feedback from his clients, but sometimes, it’s possible to have too much good data, as well.

“Make sure you’re gathering information in a manner that you can and will do something with it,” he says.

Narrow down what you’re trying to learn and only gather the information you truly need.

“If you gather 50 pages of data and you only have the time and resources to do anything with five, just gather five because you’ll spend more time trying to figure out which 45 pages of data to get out of your way than you will executing on the five you ultimately narrowed down,” Kleimann says. “It’s human nature today to try to do more than you possibly can, so narrow it down and spend your time and your client’s time gathering that data to what you can achieve.”


Create a strategy

Once Kleimann had gathered data from his customers, he needed to evaluate it and create a strategy around it to move Odyssey forward.

“You might come up with three ideas in one area and only one idea in another area, but that one idea may have a much larger impact on your average client than any one of these three over here,” Kleimann says. “It’s important to weight those, and a committee approach to that is really the best. You can’t do them all. There are limited resources in any business, so it’s figuring out the ones that serve them the most.”

He created a committee that consisted of himself and the director of each core discipline — seven people in total. With a committee in place, then you have to identify criteria by which to evaluate your feedback, and it’s important to do that before you start sifting through it all.

“If you start looking at the data before figuring out how you want to measure it, you may not be as objective with it,” he says. “Figure out those things you’re trying to accomplish that will drive the business, drive the intended results and figure out how to measure that data in a way that it can help you accomplish that goal.”

The main metric for Odyssey was that the idea had to have a direct effect on the client. In some cases, that meant changing a process within Odyssey that would affect the rate it charged customers. In other cases, it meant developing systems and programs to help the client’s processes. Lastly, everything needed to be simple and ease the interaction between the client and Odyssey.

The committee members used these criteria to score and rank the ideas they got from the feedback. Through this process, Kleimann and his team clearly saw how to become more effective for their clients. They realized that many of their clients were blue-collar companies, but they really needed to target white-collar companies.

“Make sure that you thoroughly understand your customers and the differences that may exist within your client base,” he says.

While he had nothing against the blue-collar companies, the white-collar organizations used more systems and training because the cost of human capital was higher than that in the blue-collar organizations. Since they needed more systems and services, those companies could help Odyssey better refine its offerings than the blue-collar companies could.

“You’re selling that or providing that to someone who doesn’t understand the intricacies,” he says. “A Jaguar may look like a Hyundai under the hood to somebody who doesn’t know anything about mechanics.”

The data also showed him that the average client had about 25 employees, so Kleimann started marketing to larger organizations that had 500 to 1,000 employees. By gaining them as clients, their systems were already more sophisticated and could help Odyssey put systems in place so that their clients wouldn’t outgrow them.

“It’s not just we wanted to be serving larger clients,” he says. “It was we wanted to learn everything we could learn to help our core business, and it has. It’s helped us a lot, so look to new markets as a learning opportunity.”


Implement the strategy

When it came time to start redirecting Odyssey’s efforts, Kleimann and his team were so eager to get started that they jumped the gun a bit.

“We made the mistake that most companies would make and that was we wanted to do everything today,” he says.

Instead of mapping out, say, the top 10 tasks and going after maybe two at a time, each director took the things they were responsible for and took off simultaneously. That worked well for a couple of weeks but most of the projects involved shared resources, like IT or accounting, where changes needed to be made to systems and processes. With such demand placed on a few key departments, it created a tangled mess, so Kleimann and his team had to take a big step backward and re-evaluate what to prioritize within the priorities.

“The first part of detangling that web was to reset expectations internally,” he says. “Everybody wanted theirs done first. … Much like they would in a sporting event where there was a tie, they may look at the number of possessions or some other criteria, so we had to go back and objectively figure out which ones were most important and least important.”

They looked at each idea’s original ranking, and while some directors weren’t thrilled about where their project fell on the spectrum, nobody could argue because they had created the criteria and ranked them together.

With a new game plan, they then had to find a way to measure it all.

“Figure out what’s manageable,” he says. “Put together a project plan that takes into consideration the resources you can deploy at any given time, and then have a process for measuring those results. This is just pure project management.”

Kleimann used Microsoft’s SharePoint so his employees could collaborate internally and communicate details. Kleimann wanted to know the status of each project, measured the same way, any changes to the estimated completion time and any changes to the stakeholders involved in making it happen, and he wanted this information each Friday at 4 o’clock in the afternoon.

After organizing the process more, Odyssey took off, and today the company’s plan is paying off. Revenue has grown from $302 million in 2000 to $440 million last year. But the benefits aren’t just financial. Odyssey has been ranked by outsourcing experts as No. 1 in its space the last two years, and clients are now sticking around because Odyssey finally has the capabilities to handle them.

“We’ve built a model today that’s cradle to grave,” he says. “We don’t have a scenario today that we have a client that’s facing growth that puts them outside our capabilities.”

While Kleimann is excited about Odyssey’s success, he says that success is often the biggest challenge to future success, so as people catch up with what he does, he’ll have to find new ways to be relevant to his clients.

“We said, ‘This is the area we want to go. Do we want to sit here and compete with 600, 700, 800 [Professional Employer Organizations], or would we rather go the blue ocean strategy? Do we want to go out to our own blue ocean?’” Kleimann says. “That’s what we chose to do. Much like the book says, there are some following, and I’m sure the water will start to churn and get a little bloody where we are, and we’ll continue to find that blue water.”


How to reach: Odyssey OneSource Inc., 866-508-7361or www.odysseyonesource.com

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